Social and affordable housing contributions: Developers must play their part in social housing

Posted March 24, 2022

  • State government
SGS Economics and Planning Marcus Spiller Affordable Housing

There were several unedifying aspects to the Social and Affordable Housing Contribution (SAHC) debacle, which unfolded in Victoria in late February. Particularly noteworthy was that nobody in the property sector – either via peak bodies or individual opinion leaders in the industry – publicly accepted that developers should meet part of the cost of providing social housing in our communities.

The now abandoned SAHC would have required all developers of two or more dwellings in metro Melbourne, Geelong, Ballarat and Bendigo to pay 1.75 per cent of the value of these properties into a dedicated fund to expand community housing. The flat levy would have replaced the existing patchwork system of voluntary contributions for social and affordable housing in the Victorian planning system.

When the SAHC was announced, respected property players who in other forums had freely acknowledged that development contributions for social housing had a part to play went to ground. Instead, we heard the party line from the peaks that social housing is a community-wide problem demanding a community-wide response and not an opportunistic tax on those who build the houses we need.

Social and affordable housing should be seen as essential infrastructure

In rejecting any responsibility to fund social housing, the industry torpedoed an emerging consensus amongst developers and the policy commentators. This is that social and affordable housing should be seen as essential infrastructure for successful communities.

The wanton neglect of social housing by both major parties over the past four decades has seen it residualised as a welfare safety net. But historically, this investment was understood to play a broad infrastructure role. It was relied upon to generate wide-ranging social and economic benefits for the general community as well for those households given decent and secure accommodation.

For example, the large public housing estates built in Broadmeadows, Geelong, Dandenong and the Latrobe Valley in the 50s through to the 70s were provided not as a welfare program but as part of a plan to develop the car and power generation industries in the state. We no longer endorse the way this housing was designed, but the integration of housing and economic development policy remains a shining example for today.

Social housing as essential infrastructure serves three important functions

As essential infrastructure, social housing serves three functions, each carrying equal weight. Firstly, it protects vulnerable people in the community from crippling poverty. This, as noted, not only helps these households, it generates savings for all taxpayers in the health, education and justice systems.

Secondly, an adequate supply of social and affordable housing means that local businesses and services can have reliable access to the low and moderate pay workers they need, from supermarket shelf stackers to teachers and nurses.

Thirdly, providing social and affordable housing infrastructure makes for better cities, towns, suburbs and neighbourhoods, characterised by a healthy social mix.

Our suburbs and towns need social and affordable housing as much as they need roads, parkland and local community facilities. As responsible producers of new communities, whether in the creation of greenfield suburbs or through incremental infill projects, developers are routinely required to contribute towards the roads, parks and community facilities required to support these places. It follows that they should meet their fair share of the cost of providing social and affordable housing infrastructure.

To set social housing aside as a problem for the wider community is to ignore the developer’s obligation to produce neighbourhoods that are up to reasonable standards of social, environmental and economic functionality. Presumably, we would be aghast if the auto industry made the case that the general taxpayer should pay for seatbelts and airbags in cars because road safety is a community-wide problem and not the manufacturer’s responsibility.

The three functions of social and affordable housing – poverty mitigation, stronger local economies and better places – broadly align to the funding responsibilities of the Commonwealth Government, State Government and the property sector, respectively. These parties should each meet roughly a third of the cost of equipping our communities with this essential infrastructure.

The proposed SAHC was a sensible and simple way to fund social housing as essential infrastructure

Land development is not a cost-plus business. In meeting their obligation to contribute to social and affordable housing, developers would be forced to factor the cost into the prices they pay for land. The housing they produce will be sold into competitive markets, and they will have to work within the prices that the market serves up.

Contrary to another unedifying assertion during the short-lived SAHC debate, the levy would not have been a tax on home buyers to pay for social housing. The prices faced by home buyers would have continued to reflect wider market forces, not the simple cost inputs of developers.

Nor would the SAHC have been a tax on the risk taking, value-adding developers who build the housing we need. Rather, it would have fallen on passive owners of development land.

The SAHC was not an opportunistic, selective tax. It was a sensible and simple way by which developers could discharge their responsibility to help build essential infrastructure for our communities. It is truly a pity that it has been unceremoniously binned.

This article was first published in The Sourceable.

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SGS Economics Planning Marcus Spiller
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